Jump to content
House Price Crash Forum
Sign in to follow this  
emma9

How Would Hyperinflation Affect House Prices?

Recommended Posts

Hi,

My limited understanding of hyperinflation says that debt and cash rapidly devalue, so savers lose out but mortgages reduce in real terms. Does this mean that if hyperinflation is on the cards this is the right time to buy a house?

Thanks

Share this post


Link to post
Share on other sites
Hi,

My limited understanding of hyperinflation says that debt and cash rapidly devalue, so savers lose out but mortgages reduce in real terms. Does this mean that if hyperinflation is on the cards this is the right time to buy a house?

Thanks

In a very basic sense, then if you are a cash buyer it makes some sense to put your rapidly depreciating cash into a hard asset. Then again, if there is hyperinflation why on earth would you want to live an economy that is about to resemble Zimbabwe?

Share this post


Link to post
Share on other sites
Hi,

My limited understanding of hyperinflation says that debt and cash rapidly devalue, so savers lose out but mortgages reduce in real terms. Does this mean that if hyperinflation is on the cards this is the right time to buy a house?

Thanks

Yes. Probably a good time to get into BTL as well.

F

Share this post


Link to post
Share on other sites

I actually think homes would go down in value, but may stagnate in nominal terms. In Zimbabwe houses are effectively worthless, as a house is a static illiquid asset that requires social and economic stability to even be considered as a worthwhile investment. Oh and consider that no bank is gong to lend you current IR's under such conditions, they'd probably be re-rating them every other month so can your wages hold up with such hikes..i.e. IR of 20-30%

Member of a Union eh? :)

Share this post


Link to post
Share on other sites
Guest Skint Academic

Once inflation starts rising it's really difficult to get it under control again. If you're going to base a house buying decision on runaway inflation, there's plenty of time to make sure that it has started. Interest rates are still historically low and many people on here think that we could be entering in a period of deflation as happened to Japan.

My parents told me of a housing 'boom' in the 70's where people were getting a mortgages that were quickly eroded away by inflation. But they don't really look into economic issues in much depth so I don't know the specifics of the situation.

Share this post


Link to post
Share on other sites

in hyperinflation property prices continue to rise above official inflation levels, however they fall relative to foreign currencies. Emmigrating is the best option, although you could buy one or more houses before hyper inflation picks up, so you can return when the ecomony has recovered.

Share this post


Link to post
Share on other sites

As AlfieBear says, it could make buying a house a sensible decision if you're buying for cash.

It wouldn't make buying on a mortgage sensible because interest rates would go through the roof and therefore ones income might inflate more slowly than ones debt.

But Alfie is right to mention Zimbabwe: Might be best of all to have some wealth in gold and foreign currency to let one leave these shores behind.

Personally I do not see hyperinflation as a likely outcome, but wise to consider it as a possibility in planning.

Share this post


Link to post
Share on other sites
Hi,

My limited understanding of hyperinflation says that debt and cash rapidly devalue, so savers lose out but mortgages reduce in real terms. Does this mean that if hyperinflation is on the cards this is the right time to buy a house?

Thanks

Emma, I do hope that just because you saw a suggestion that hyperinflation was on its way on this website that you DONT actually think that it is going to happen. I think all would agree that there is a tendency to over react on site at times.

Edited by pimperne1

Share this post


Link to post
Share on other sites
Hi,

My limited understanding of hyperinflation says that debt and cash rapidly devalue, so savers lose out but mortgages reduce in real terms. Does this mean that if hyperinflation is on the cards this is the right time to buy a house?

Thanks

Debt only devalues if wages go up.

Share this post


Link to post
Share on other sites
Guest muttley
Emma, I do hope that just because you saw a suggestion that hyperinflation was on its way on this website that you DONT actually think that it is going to happen.

Quite. Also bear in mind that there is a big difference between high inflation and hyperinflation. There is no evidence that either is "on the cards".

Share this post


Link to post
Share on other sites
Hi,

My limited understanding of hyperinflation says that debt and cash rapidly devalue, so savers lose out but mortgages reduce in real terms. Does this mean that if hyperinflation is on the cards this is the right time to buy a house?

Thanks

If we have hyperinflation then house prices are the last thing you will be worrying about.

When a loaf of bread cost £5, a tin of beans cost £2.50 and your cost of travelling to work has tripled, the "affordable" monthly repayment on your mortgage is suddenly going be very hard to meet. You might say to your boss "I need more money" and he will probably reply "there is no more money, it has all gone on increased cost of raw materials and no-one can afford to buy our goods anymore...in fact we can't afford to employ you anymore so we are letting you go."

Hyperinflation = economy screwed = jobs lost = repossesions

Share this post


Link to post
Share on other sites

As houses are utterly illiquid, they nominally hugely gain in a hyperinflation but are no match for other goods/commodities that are more liquid. Allegedly, you could by a whole block of tennement flats in Berlin during the hyperinflation for 1oz of gold. That's £360 today.

Edited by Goldfinger

Share this post


Link to post
Share on other sites
Debt only devalues if wages go up.

Exactly. Why do so few people understand this???

If we have hyperinflation then house prices are the last thing you will be worrying about.

When a loaf of bread cost £5, a tin of beans cost £2.50 and your cost of travelling to work has tripled, the "affordable" monthly repayment on your mortgage is suddenly going be very hard to meet. You might say to your boss "I need more money" and he will probably reply "there is no more money, it has all gone on increased cost of raw materials and no-one can afford to buy our goods anymore...in fact we can't afford to employ you anymore so we are letting you go."

Hyperinflation = economy screwed = jobs lost = repossesions

Agreed.

Share this post


Link to post
Share on other sites
Guest DissipatedYouthIsValuable
As houses are utterly illiquid, they nominally hugely gain in a hyperinflation but are no match for other goods/commodities that are more liquid. Allegedly, you could by a whole block of tennement flats in Berlin during the hyperinflation for 1oz of gold. That's £360 today.

And I think you should do that, Goldy, I think you should do that.

Share this post


Link to post
Share on other sites
And I think you should do that, Goldy, I think you should do that.

In the case of a real hyperinflation, I would become the first mayor of Berlin who completely owns the city. ;)

Edited by Goldfinger

Share this post


Link to post
Share on other sites
Guest DissipatedYouthIsValuable
In the case of a real hyperinflation, I would become the first mayor of Berlin who completely owns the city. ;)

You'll have to get yourself a lovely small moustache soon.

Share this post


Link to post
Share on other sites
As houses are utterly illiquid, they nominally hugely gain in a hyperinflation but are no match for other goods/commodities that are more liquid. Allegedly, you could by a whole block of tennement flats in Berlin during the hyperinflation for 1oz of gold. That's £360 today.

Alternatively, you could also buy a house with 1000 tins of baked beans. Somerfield’s currently have an offer of 4 tins for £1.20 (personally I make my own), but during hyper flation they will be sold at £12,000. By the time you get to the counter of course they will be £15,000.

Share this post


Link to post
Share on other sites

I read about a woman in Zimbabwe who bought a loaf of bread recently that cost more than her house did some six?? years before.

Presumably the value of the house has risen in relation to the cost of bread.

But if she had a mortgage the repayments would have increased dramatically for a while at the same time employment prospects would have dropped and the chances of repayment decreased.

The solution invest in the things that are going up (if you have spare cash) like food and energy.

Its all a bit of a headf**k trying to work it out.

Share this post


Link to post
Share on other sites

My fiance is Zimbabwean so I get lots of info about whats going on over there.

A major issue caused by the hyperinflation is that by the time you've got the funds from the sale of a property inflation has ramped the price on the replacement, so unless you can complete in a few days your in a sticky situation.

Share this post


Link to post
Share on other sites
My fiance is Zimbabwean so I get lots of info about whats going on over there.

A major issue caused by the hyperinflation is that by the time you've got the funds from the sale of a property inflation has ramped the price on the replacement, so unless you can complete in a few days your in a sticky situation.

Or if you are using your house as a pension, when you come to cash it in to live on the proceeds you find that you don't have enough money to pay for more than a year of bills.

Hyperinflation = everybody screwed!

Share this post


Link to post
Share on other sites
Alternatively, you could also buy a house with 1000 tins of baked beans. Somerfield’s currently have an offer of 4 tins for £1.20 (personally I make my own), but during hyper flation they will be sold at £12,000. By the time you get to the counter of course they will be £15,000.

Hmm, I guess your truck might get loited on the way... Would you keep those tins under your bed?

A major issue caused by the hyperinflation is that by the time you've got the funds from the sale of a property inflation has ramped the price on the replacement, so unless you can complete in a few days your in a sticky situation.

That's why gold becomes so incredibly valuable in such a situation.

Share this post


Link to post
Share on other sites

I think hyperfinflation (which is now a distinct possibilty after todays disgaceful announcement) is now a distinct possibility.

This makes nominal falls a lot less likely.

No point in selling your house unless you're going to send the money out of the country.

I STRd recently and moving abroad next month. Used two thirds of it to buy gold and euros and foreign property stock. Was going to rent abroad but not now. I'm going to buy (Germany). Want to leave as little in this country as possible.

STRing and leaving the money in the UK doesn't look like a clever move now.

Edited by barry

Share this post


Link to post
Share on other sites
Guest muttley
Allegedly, you could by a whole block of tennement flats in Berlin during the hyperinflation for 1oz of gold. That's £360 today.

Was it this one?

04-miscBerlinBerlinCathedral.jpg

Share this post


Link to post
Share on other sites
If we have hyperinflation then house prices are the last thing you will be worrying about.

When a loaf of bread cost £5, a tin of beans cost £2.50 and your cost of travelling to work has tripled, the "affordable" monthly repayment on your mortgage is suddenly going be very hard to meet. You might say to your boss "I need more money" and he will probably reply "there is no more money, it has all gone on increased cost of raw materials and no-one can afford to buy our goods anymore...in fact we can't afford to employ you anymore so we are letting you go."

Hyperinflation = economy screwed = jobs lost = repossesions

I think this article sums up CBW's post perfectly. This is from July THIS year.

Link - 'A banana costs more than my house'

Share this post


Link to post
Share on other sites
Guest Charlie The Tramp

Also remember under Harold Wilson with high inflation, house prices actually dropped in real terms. Over the 3 year period the total fall was over 30%.

Harold Wilson's 1974-76 Labour government exhibited the worst house record on house price stability with falls of 13% a year.

A great period to buy. ;)

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 355 The Prime Minister stated that there were three Brexit options available to the UK:

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.